Honestly, damn your friend. Report him, and if he gets questioned or fined for it, flatly reply "Perhaps you'll reconsider next time you decide to steal a game."
'I don't want to pay for it' - that's just insanity. I don't know how anyone with a properly adjusted personality and lack of head trauma can honestly idealize that as a legitimate excuse. I didn't want to have to pay for my apartment, car or food this week but that doesn't mean "Oh, well, by all means, go steal it sir."
I'm not going walk past the ticket counter in a movie theater, and when stopped reply "Oh, I didn't want to pay for it. I wasn't going to anyway, so you didn't lose a sale.", and be let in on those grounds.
I've always been impassioned about this subject. I can't stand people who pirate games, movies or music and don't even have the balls to admit, even to themselves, that they've stolen something.
Unless, of course, your conscience is niggling at the back of your head and you only did it because you're too afraid of real-world consequences rather than, y'know, morality and goodness.
So report your friend. I would.